The cost of raising a child in Australia

Quick stats

In Australia, the average cost of raising a child from birth to seventeen years old is $297,600

‘Long-day’ childcare can cost up to $170 per child per day

Schooling can cost up to $66,000 through the public school system and $475,000 through a private school

4% of 20-24 year olds and 17% of 25-29 year olds continue to live in their parents’ home

How much does it cost to raise a child in Australia?

According to a 2016 study, the average cost of raising a child from birth to age 17 is $297,600 for a typical middle-class Australian family [1].

Even so, this cost can vary from household to household based on a variety of factors. Depending on the income bracket of the family, this cost will vary, with lower income families spending less on raising their children on average and higher income families spending more [2].

And the news gets worse: while the average cost of raising a child has increased by 45% in the past ten years, average household incomes have only increased by about 23%, which means the cost of raising children is growing at double the rate of our average incomes [3]. Future projections estimate that this disparity between child-raising costs and household incomes will become even steeper.

Studies have found that one potential reason for the rise in child-raising costs could be the changing community expectations of what children need in order to live a healthy lifestyle. Healthy eating and exercise costs are driving these lifestyle costs up in an effort to combat health concerns that weren’t as prevalent ten to twenty years ago, such as childhood obesity and diabetes.

Child education costs

According to the Australian Scholarships Group (ASG), a child born in 2018 will cost around $66,000 to educate (from Prep to Year 12) in a public school in Metropolitan Australia. Educating the same child in a private school costs around $475,000.

The costs are a bit lower in regional Australia. The average cost of educating a child in regional Australia is $50,641 for public schools and $347,572 for private schools. These figures include tuition and predicted expenses for transport, clothing and extracurricular activities.

Where you live in Australia also affects your child’s education costs, with Sydney and Melbourne being pricier regardless of whether your child attends a government school or a private school. Hobart currently boasts the most affordable public education in Australia (for capital cities) at around $42,000 per child [4].

There is a common perception that sending your child to a private school will result in an improved educational outcome. However, several studies conducted in the past few years contradict this assertion.

The latest, conducted by the National Institute for Labour Studies, found that the main determinant for higher raw test scores in private schools was the higher socio-economic status of the students who attend those schools, and that “school quality does not depend directly on the sector of the school” [5].

A large number of similar studies have come to the same conclusion – for example, the OECD’s Programme for International Student Assessment found no significant difference in public, Catholic and private school results after taking socio-economic background into consideration.

What’s also interesting is that a study published in the Economics of Education Review found that Australia’s decline in academic performance in international tests over the past decade was primarily due to poorer results in private schools – not public schools.

Childcare

For some couples, having two incomes isn’t a choice – it’s a financial necessity. With both parents working, child care becomes a major expense. Some parents even call it ‘our second mortgage’.

Childcare in Australia isn’t cheap. A recent report showed that costs have climbed 150% in just the past decade [6]. As a result, parents who return to full-time employment are losing up to 60% of their gross income to childcare costs. This is the result of skyrocketing childcare fees, higher income tax rates and loss of benefits.

With over 630,000 Australian families paying up to $170 per child per day for ‘long day’ childcare, it’s no wonder that telecommuting and work-from-home options are becoming increasingly popular [6].

The costs we don’t really think about

The main costs associated with raising children are food and transport – as anyone who has tried to feed three teenagers and drive them all around to soccer/ballet/chess practice can attest. But there are a lot of other expenses that tend to creep up on us without warning.

The more children you have, the bigger your car and house will need to be to accommodate them. If a child is sick and has to stay home from school, you have to take time off from work to look after them – which costs you money. Each child will have their own sports, hobbies and activities to fund. And while you always wear the same sized shoes and clothing, children have this inconvenient habit of growing out of theirs.

The older they get, the more they cost

When you have a new baby, it seems like there are so many new things to buy. Prams, cots, bouncers, baby carriers, soft toys, clothing, formula, inoculations, nappies and baby capsules just to name a few. But the serious expenses of raising children don’t really kick in until they get a bit older. Education, recreation and transport costs start to take centre stage in a big way.

Of course, teenagers can sometimes offset these costs by taking on a part-time job, but there’s no getting around the fact that older children eat more, enjoy a wider range of social, educational and sporting activities and cost their parents more money than the younger ones.
And don’t think the costs of raising your offspring necessarily end when they turn 18.

The 2017 census revealed that 43.4% of 20-24 year olds and 17% of 25-29 year olds continue to live in their parents’ home for a variety of reasons: the high cost of tertiary studies, the frightening costs of buying a new home and the difficulty of finding suitable employment, to name a few. There are even special names for these ‘late-leavers’: S.L.O.P.s (Singles Living Off Parents) or K.I.P.P.E.R.S. (Kids In Parents’ Pockets Eroding Retirement Savings) [7].

To help children with deposits for a first home or fees for higher education, some parents are even delaying retirement. Sacrificing their own financial security to make life easier for their kids. In a tightening economy, it can be hard to find the right balance.

Australia vs The rest of the world

Compared to the average cost of raising a child in other developed countries, Australia ranks somewhere in the middle. On average, it costs less to raise a child in Australia than in the United Kingdom, Canada, and the United States [8]. However, the average cost of raising a child is higher in Australia than in New Zealand and Germany [9] [10]. One factor that might influence this is the amount of financial support families receive in each country to help them cover the costs of raising their children.

Life Insurance is a safety net for your children

As a parent, your financial responsibilities substantially increase. There are car payments, a home loan, education costs, ongoing living expenses and a host of other obligations to meet. But what happens to a child if a parent succumbs to illness, injury or death?

The purpose of life insurance is to provide an income source for the surviving spouse and children if something unexpected happens. It helps ensures the family is looked after if the surviving partner cannot look after the home or work.

As the average cost of raising a child continues to increase, life insurance becomes increasingly important. Here are some options to consider:

Death Benefit

A Death Benefit offers financial protection for the surviving family if one or both parents away unexpectedly. It provides a lump sum benefit to help the family deal with ongoing living expenses and accumulated debt commitments.

TPD (Total and Permanent Disability) Cover

If one or both of the parents should suffer from a total and permanent disability that prevents them from working or managing your home, TPD cover is designed to provide a lump sum to help the family under those circumstances. TPD is what is referred to as a Living Benefit.

Trauma Cover

Trauma cover is another type of Living Benefit that comes into effect in the event of a serious illness or injury, which might include (but is not limited to) stroke, certain kinds of cancer, heart attack and coronary artery bypass surgery.

Children’s Cover

Children’s Cover helps parents take time off work to look after a child in case of injury or illness. It can help meet mortgage, rehabilitation and other expenses at the same time. A lump sum benefit can also help to keep the household running in the event of a child becoming seriously ill or injured, or passing away, and relieve the financial strain if parents need to take unpaid leave.

Life insurance is much more than a safety net – it can be a vital investment in a children’s future financial security. Each insurance policy is different as are the needs of each family unique. Shop around and read the PDS as Life Insurance policies may differ.

Tips for cutting costs

Some of the costs of raising children are fairly easy to measure (food, toys, recreational activities). Others are harder to pin down to an exact figure (increased household energy consumption, transport costs). Finding ways to save is tough, especially in these economically stressful times.

Over the course of an entire childhood, there is an awful lot of transport to and from school. Have you worked out whether it’s cheaper to drive your children or let them take public transport? If the child is old enough and you feel comfortable with the safety aspects, a bicycle can be one of the most inexpensive ways for a child to get to and from school.

When it comes to buying food for our children, there are plenty of simple ways to save. First, look at the nutritional value of the food in relation to its price. Colas, chips and mass-produced refined foods have very little nutritional value but can cost even more than healthier alternatives.

Buy produce when it’s in season. Look for home brand items. Take advantage of sales and coupons. Pack your child’s lunch instead of giving them money for school tuckshop or a takeaway. Buy food that’s tinned, dried or frozen – it may be considerably cheaper than the fresh version but equally nutritious. Keep your portion sizes under control to reduce food wastage.

More research & statistics:

Recreational costs are a major expense when raising children. By the time you add up all the group sports, music/dance/karate lessons, beach holidays, video game requirements and all the rest, it’s clear that keeping your kids happy, engaged and occupied can become quite expensive. When money is tight, consider giving your children the choice between two recreational options rather than paying for both.

Remember to keep time for the free stuff. Kicking a ball around in the park, going for a bushwalk or flying a kite is free.

Because children grow out of their clothing quickly, you’ll want to use every trick in the book to save money. One tip is to buy gender neutral clothing that either your daughter or son could wear (and future children too).

Buy second-hand clothing – it can often be of perfect quality and cheaper than a similar item new. Before you hit the shops, check eBay – there are some impressive clothing deals there, even considering the costs of shipping.

Seek expert advice when planning for your child’s future

It isn’t always easy to make the right long-term financial decisions for your children’s future. You want to give them the very best life experiences and supportive environment you can, but not break your budget in the process.

It’s difficult, and that’s why it’s wise to seek advice from a financial professional. ASIC’s website moneysmart.gov.au can provide a list of financial advisers and counsellors.

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